Finding Profit Stability in a Climate of Rising Costs
by Tensar International, on Mar 25, 2021 4:05:09 PM
In the ancient days (P.C. – that is, pre-Covid), all was right in the land. Workers worked. Drivers drove. And a transportation contractor or road-owner could call a supplier and have a reasonable expectation that the order would be filled and arrive on time (and at a non-gouging price.) But then, a scourge spread across the land, and you couldn’t count on anything anymore. And, even in post-pandemic times, the situation is probably not going to soon stabilize.
The construction industry is facing significant challenges in the new year as limited workforce availability, rising material costs, and a declining number of available contracts plague the field, according to Kenneth D. Simonson, Chief Economist for the Associated General Contractors of America. Simonson discussed many of those issues during his keynote at Tensar's recent Contractor's Virtual Road Show on February 18, 2021. Since the shutdown of March of 2020, the cost of inputs for non-residential construction increased by an average of ten percent. He pointed out that the price of copper, which many see as a predictor of the cost of a broad mix of construction inputs, continued to skyrocket into the first quarter of 2021. That, along with other indicators, led him to predict that contractors should not expect relief on material costs anytime soon.
Simultaneously, new project contract bid prices for road construction basically remained stagnant, if only dropping by a marginal 0.1%. Simonson warned that a combination of stagnant bid prices and skyrocketing materials cost is a formula for some contractors to go out of business. Still, the economist did offer some reason for long-term optimism as he predicted the new Biden administration to turn its attention to infrastructure projects in the second half of the calendar year 2021.
Secretary of Transportation Pete Buttigieg is expected to focus less on "shovel ready" projects favored by the Obama administration during the 2009 recovery and place more focus on vital long-term work. Since these types of projects are subject to lengthier planning and approval cycles, Simonson doesn’t expect the new work to come online in 2021. In the meantime, data collected by the Associated General Contractors lead him to believe that highway and bridge contracts could fall by as much as 11% in 2021.
Cost-containment begins below ground
Even as the industry faces headwinds, individual contractors have opportunities to differentiate themselves in the marketplace by finding new yet proven ways to contain costs. Tensar Geogrid technology presents one such opportunity to decrease material costs, reduce time-to-build, and reduced truck rolls.
Tensar Geogrid’s superior soil stabilization performance reduces the amount of aggregate required on a roadbed and the thickness of the asphalt necessary to achieve the original design life. A reduction in those required materials directly translate into lower costs and less dependence on raw material suppliers. That's a significant advantage as supply remains uncertain and material costs continue to fluctuate.
Less hassle, less CO2
Less material also means fewer truck rolls and less uncertainty and scheduling hassles around delivery. And fewer diesel trucks on the road lead to fewer carbon emissions involved in finishing each job, making your project more environmentally friendly.
Easier, faster, safer installations
The ease of geogrid's deployment over other stabilization methods translates into fewer work hours on-site, reducing on-site work hours and a contractor's dependence on uncertain labor availability. With weather uncertainty on the rise, hours and days lost to suboptimal conditions are also a growing concern. Mechanical stabilization methods can help a contractor recover job days lost to inclement weather and lead to a safer work environment. Tensar Geogrid can be deployed even when a worksite is saturated from precipitation. In contrast, chemical stabilization methods can only be deployed in very specific conditions, sometimes holding up jobs for days or weeks.
Finally, using ash or lime for chemical stabilization introduces pollutants into the environment, which can leech out of the roadbed into the local aquifer, possibly impacting community health in the long term. Geogrid’s mechanical stabilization method avoids those long-term environmental impacts.
Tensar’s Geogrid offers contractors many advantages in the current challenging marketplace. Reduced dependence on materials, lowered material and labor costs, greater flexibility in work conditions, and less environmental impact are valuable tools to consider when planning roadway construction. Getting back to normal will require a lot of hard work and some real innovation, but with some creative problem solving, contractors can come through the COVID shutdown and the ensuing uncertainty in a position of strength. Tensar’s Geogrid is part of the road to that future.
How can Tensar help you get ahead? Our 360° System Approach empowers you to achieve cost-effective, reliable solutions for your civil construction projects. Learn more.